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DoD News Briefing: Mr. Kenneth H. Bacon, ATSD (PA)

Presenters: Mr. Kenneth H. Bacon, ATSD (PA)July 14, 1995

(NOTE: Also participating in this briefing was Dr. John White, Deputy Secretary of Defense; Rudy de Leon, Under Secretary of the Air Force; Mr. Joshua Gotbaum, Assistant Secretary of Defense for Economic Security; and Lt. Gen. George Babbitt, Air Force Deputy Chief of Staff for Logistics)

Mr. Bacon: Good afternoon.

When a new Deputy Secretary of Defense takes over, we like to make sure that he or she hits the ground running, so it was appropriate that John White should come and take over the BRAC account on his first day in office. As a matter of fact, the Secretary promptly left town, leaving the entire BRAC negotiations to Secretary White. He's here today to answer your questions on the President's decision and the package that was accepted by the President earlier today.

With him is Rudy de Leon, the Under Secretary of the Air Force; Josh Gotbaum, the Assistant Secretary of Defense for Economic Security; and Lieutenant General George Babbitt, who is the Deputy Air Force Chief of Staff for Logistics.

With that, Dr. White.

Secretary White: Thank you, Ken.

As you know, earlier today the President approved the recommendations of the '95 Defense Base Closure and Realignment Commission. He did that on the advice of Secretary Perry, and after our full consideration of all of the changes that were proposed by the Commission. We will provide you with the President's letter and the Secretary's letter and other materials after this briefing.

The President's letter indicated that this is clearly painful. It's painful for communities who have to lose these jobs, but that this process is the only one that we've found that allows us to do significant reductions in the infrastructure of the Department. He also noted that it's the only way that we've been able to do it with some objectivity and finality.

The Secretary noted that the cost savings that we obtain from these job losses, from these base reductions, are critical to us in terms of our modernization program, but he was also disappointed in the large number of deviations that the Commission made from the Department's recommendation. In fact this is, according to Chairman Dixon's count, as well as ours, the largest set of deviations ever made.

But nevertheless, these savings are very, very important to us. We will get about $20 billion in savings over 20 years from this BRAC list alone, and all together, we will have over $65 billion in savings to the Department, which are critically important to us in terms of our future programs.

We are the first to recognize that these come with significant pain in terms of communities. People lose their jobs, people get dislocated, bases close. Therefore, we want to emphasize the help that we give, the effort we give, to help communities create new jobs. We have a now quite mature program underway for these communities. We put experienced people in the communities. The Commerce Department provides support for grants for construction, so there is a very robust program for doing this. In fact we've had a lot of success.

There are over 10,000 new jobs and 300 employers on closed bases, and about 60 percent of all of the jobs have been replaced on bases that have been closed more than a year.

Let me mention a couple of particular success stories. One is in Sacramento, one of the communities that we will talk about in some detail later. The Sacramento Army Depot, which has been closed formally just since March of '95, now has 4,000 Packard Bell jobs, where it is now the company's headquarters, and that number will be growing this year.

Let me give you two other illustrations -- the former Chanute Air Force Base in Rantoul, Illinois; and the former England Air Force Base in Alexandria, Louisiana. In these two cases the communities have been able to create some 2,000 more jobs, which is more civilian jobs now than they had when the bases were open.

In the case of Illinois, Rantoul, they've got 43 tenants, and about 1,000 new jobs. The Mayor says, "We are on the road to recovery, and I continue to be excited about reuse."

In Alexandria, which is a former Air Force base, they have productive re-use with some 15 leases, about 800 jobs, and 200 more expected this year. The Mayor has said, "This community didn't just survive, we have prospered."

At the same time, I want to emphasize that we're going to focus on individuals. The fact of the matter is, not everybody gets one of these new jobs, so we have a program that does job training, job retraining, job relocation, and specific placement for people. That also is very important to us.

Let me talk specifically about BRAC'95 which has more changes from our proposed package than any other BRAC process before, and it has very large closures, in fact as large as has ever been experienced before.

The result of that is significant disruptions in terms of military operations, even though we were able to realize about the same size savings.

Because of the size of these changes and the magnitude of the change with respect to particular communities that we'll hit which were not on our list, the Secretary and the President were particularly concerned about economic impact of this BRAC round. We were particularly concerned about that impact on two very large facilities -- McClellan Air Force Base in Sacramento, California, and Kelly Air Force Base in San Antonio, Texas. You will recall that in the Department's package, these were not recommended for closure. These are very large facilities, some of the largest ever closed, and in fact have really very major impacts on these communities.

This is particularly true with respect to California. There's been a lot of discussion about California. If you look at the data on California, it is overwhelmingly the case that California has suffered more in terms of the base reduction process than any other state. It has sustained about 50 percent of the job loss. It has lost nearly 168,000 jobs. That's more jobs than the next ten states combined. So even if you accept the fact that California has been a state with a large amount of DoD activity, its losses over these periods, and in the last round as well, far exceed any proportional or other measurement you might have in terms of base reduction. So it has been very, very significantly hurt.

As I said earlier, as a result of these changes, we're trying to obviously encourage reuse in all of these communities, and in these two communities in particular. But we're going to add a new program in this case, and that's a major privatization program.

We have learned over time, in terms of the experience of the Department, specifically after the last BRAC round in terms of what the Air Force is now doing in Newark, Ohio, and in terms of looking at this BRAC round, we think privatization in place meets a large number of the requirements that we have. It clearly continues to save the money; it reduces our readiness risk because we don't relocate all the workers; it protects people's jobs; it keeps our skill base there; it doesn't require us to incur the cost of relocation; and it obviously, mitigates against the economic impact on the community.

Privatization, per se, is not a new concept. The Department does a lot of privatization. As I mentioned, it was used in the last round. On the other hand, I think this is the first time the Department has emphasized privatization as a major element along with all the other elements that I mentioned in terms of the BRAC process.

This has been recommended to us, first of all, in the '93 round, and then in the '95 round it was also recommended by the Roles and Missions Commission as a device for taking down the infrastructure in the Department. It was mentioned by Chairman Dixon in his press release, and it was mentioned specifically by Chairman Dixon in his recent letter to me, where we had asked him to clarify whether or not they were restricting us in terms of our ability to conduct such a program in these two facilities, in these two communities, and he said no.

In addition to that, the Navy is looking at similar programs and evaluating them for two of the other facilities affected by this round -- the Naval Air Warfare Center in Indianapolis, and the Naval Surface Warfare Center in Louisville, Kentucky.

So while we think clearly it is painful to go through all of this in terms of these kinds of reductions, we think a privatization program meets the objectives that we've talked about. The Air Force has been working hard over the last two weeks to make sure that this makes sense. We are convinced that it does. So we think, in terms of adding this element to the program, we can still meet our cost reductions, we can mitigate some of the very large impacts on particular communities, and we can still meet the savings that we need from the Department's point of view for our modernization program.

In closing, let me say that the Secretary and I are pleased with what the BRAC Commission has done. We would have liked it done somewhat differently, but nevertheless they've met their responsibilities. They've provided us with the savings that we need, and that's very important to us, and that's why the Secretary recommended to the President that he accept the list and the President, as you know, did accept the list, and it's on its way to the Congress.

Q: Will these jobs be essentially Defense Department jobs and be paid for by the Pentagon? These new jobs? And if the whole idea is to cut jobs and infrastructure and save money, then if you continue to pay these people, how are you saving money?

A: The jobs that I'm talking about, at least for the transition period, the jobs that we're talking about will be DoD jobs. The jobs after the transition period, which will last five years, some of them, we will reduce the number of DoD jobs, but there will remain DoD jobs in these communities, and we anticipate there will be other private sector jobs.

The notion here is to save money by reducing infrastructure. We are reducing infrastructure. We are, in this case, if you're speaking specifically of these bases, closing these bases. We are eliminating these facilities. We still have work to do. We still need it to be done some place, and we think it makes sense in these instances to do that work in these communities.

Q: As a brief follow-up, so you say these are not make-work jobs...

A: Not at all. These are jobs that the Air Force has assessed they would have to do in any event. These are real jobs. They are not make-work jobs by any means.

Q: ...the work to be done not on the base? The bases will be closed and the work will be done where, then?

A: The work will be done at some place... Once we transition the bases and close them, it will be done someplace else in the community. These will be private sector jobs. We don't require the base facilities to do all of this work.

Q: How many jobs are you specifically guaranteeing or proposing to save in Sacramento and San Antonio, at Kelly and McClellan?

A: In McClellan, we will have about 8,700 jobs.

Q: Saved?

A: Saved.

Q: For the five years.

A: For the five years. And in Kelly we will have 16,000 jobs saved.

Q: At what cost?

A: I don't have the calculation for the cost, but these are jobs we would have to do in any event.

Q: What about afterward, the private sector jobs in the area? How many will remain in the private sector?

A: At Kelly, after the first five years, we anticipate that they will remain about two-thirds of all of the DoD jobs, and we anticipate that the community -- and the community anticipates, I should add -- that they will be able to add private sector jobs and at least be able to maintain their current employment, if not grow it.

Q: What about at McClellan?

A: At McClellan it will be over 50 percent of those jobs. Again, we think there is no need that the number of jobs in fact be reduced. We have a five year period of transition; we know what we're doing; we're going to then provide contracts for five years; and the community working with us and we with them, we think we can grow these jobs.

Q: At the end of the five year transition period you're estimating between 4,000 and 5,000 private sector jobs will remain in the Sacramento area under this privatization...

A: I'm saying that at the end of the period, based on the numbers that I gave you, that about two-thirds of the DoD jobs will remain there in the case of Kelly, and over 50 percent in the case of McClellan, and that we think the communities will be in a position to add to those jobs private sector jobs, since they'll have the opportunity to do that.

Q: You're saying 50 percent of the 8,700, is that right?

A: Over 50 percent.

Q: What is the source of the private sector jobs that will remain in the Sacramento area or in the San Antonio area?

A: In the case of the program that we are putting in place, we are targeting these communities in terms of the needs that we have there with these skilled workers. So the contracts will be let in these communities for jobs for work to be done in those communities.

Q: Will these people be doing the same thing? Putting on aircraft wings or doing...

A: They will be meeting Air Force missions just as they are today, and they will be essentially an extension of the missions they have today.

Q: Even after the five years?

A: Yes.

Q: What's the idea of closing the base?

A: We save a lot of money by closing the base. These are very large airfields, large hangars, big machine shops. We're going to lose those. We don't need all that space.

Q: And the other three bases won't be able to do the work, you'll need the work to be done by people...

A: We think it's both in terms of readiness and cost effectiveness and savings, the skill base, we think it makes sense to do these here. We're going to have to deal with changes because of what they did to our plan in all five of our ALCs. We think this makes more sense.

Q: You're going to close the base and the facilities after the five year transition period, and is the plan envisioned that the workers that you're speaking of will remain in the community doing essentially the same work? Where are they going to do that work? Are those facilities in Sacramento right outside the gate?

A: They could be outside the gate. We're going to turn over these facilities to the communities. As I've indicated in terms of these other illustrations of things we've done before, in some cases the community leases back the facility to someone else and they do the work in the same place, do it across the street, they can do it down the street. The point is that they stay in the community.

Q: In a lot of the examples you cite, the work being done is not the same work the military did there.

A: We anticipate that they will grow the work and that there will be work done in these communities far beyond what it is that we're talking about.

Q: But any contracts you let are going to somehow stipulate that there will be some portion of that work...

A: The initial contracts we let will be targeted to do our work in these communities, yes, sir.

Q: Does this mean that we're not going to leave even a core work at these depots to the three remaining depots, and how do you get around 60/40 on that?

A: What it means is that the Air Force has done an assessment that allows us over the transition period to keep a large number of jobs there. We will also be moving Air Force personnel and some other Air Force people who work for the Air Force to other facilities. We haven't worked out all the details, so there's basically some of each.

We think with respect to 60/40, first of all, as near as I can tell, we can probably do most of this inside the current 60/40 rules. But more importantly, in the President's budget we have a recommendation on the Hill that we be relieved of 60/40 and we're optimistic that we're going to get that relief.

Q: Is there any change to the 800 or so jobs recommended to go to Tobyhanna Army Depot, or...

A: No. The jobs that go to Tobyhanna are called out in the Commission report that they will go to Tobyhanna and we're going to follow the recommendations of the Commission.

Q: How would it specifically affect readiness if the work were done at other depots?

A: The issue is how, in fact, you relocate the jobs and maintain the capability, repair capability, or whatever it is you're doing simultaneously. The fact of the matter is, you run risks when you start moving equipment and moving jobs and have to retrain a skill base against the one that you currently have.

Q: Can you very briefly walk us through what happens in this program? A base order goes out to close the base, the base starts shutting down gradually. As this happens, the various portions of the base are gradually or all at once turned over to the local community which then does what?

A: First of all, this has to be passed by the Congress. We anticipate that it will, and certainly hope that it will. Assuming that it's passed by the Congress, we will then in these specific cases, but across this whole package, the Air Force and the other services, have up to a five year period. In this case we think we will take the five year period for these two bases. During that five year period the jobs remain in place, and the work continues. This is mission critical work and it continues.

At the same time, we will be working with the communities to do two things, and with the private sector. First of all, to let out bids as the Air Force is now doing in Newark, Ohio, to let out bids, have a normal process by which we contract for this work with the private sector. So at the end of the five years we think we can have in place, starting now, contracts for the subsequent five year period. In addition to that we are, as I indicated earlier, during this first five year period, going to do as we do with all such impacted facilities, we're going to give them support in terms of reuse. We're going to give them support in terms of infrastructure adjustment, support in terms of job placement, guidance in terms of economic development. Out of that, we're optimistic, and I think you'll find the communities will be optimistic that in fact they can grow off this base as many facilities have in the past.

Q: The other major California base that the Commission added to the list against Pentagon recommendations was Oakland Army Base. Why did you folks and the President go to bat for McClellan and not the Oakland base?

A: The Oakland base is not nearly as large. It's a few hundred jobs, important obviously to the people. As the Army evaluated their base list, it was their judgment that in fact, even though it was a substitution, they could live with that substitution and it didn't cause the problem that these two very, very large bases had caused.

Q: Do you have any commitments, formal or informal, from industry and the private sector that they are prepared to come in and bid on some of this work? Isn't this really a time line to get you through the '96 election, and then after that this will fade away?

A: No, it will not fade away. First of all, as to the issue of bids, we have in place in Ohio, as I mentioned, a real live example. We're doing this with the private sector. Secondly, we have over the last couple of weeks, talked to a number of the kinds of firms that will do this kind of work, informally, and said, would you be interested in at least examining this, and the answer is clearly yes. This has nothing to do with the election. It has to do, as I said, with a five year period for the base and then a five year period of adjustment. This is a big program, now. We've gone through multiple base closing rounds, so this is a large program, and the concern we have is to make sure we do it in a way that gets us our savings and gets us our readiness.

Q: Did the Air Force provide DoD with any kind of proof that closing McClellan would cause a national security problem or a force projection problem?

A: When we sat down with the Air Force and looked at the way the commission had handled this problem, it was our judgment based on the Air Force analysis and on their judgment that in fact this was more than they had wanted to do. It clearly was much more than they had proposed, and as a result of that, would cause significant disruptions, and as result of that, would impact readiness. That's a big concern for us.

Q: On McClellan, are you saying during the second five year period that approximately two-thirds of the 16,000 jobs at Kelly will remain on the DoD payroll, or you anticipate them being picked up by whoever wins the...

A: DoD payroll. [private payroll under DoD contract]

Q: With all due respect, this just does not add up. Roughly half of the jobs that are projected to be cut under the base closure process, the Commission's own list, are coming from Kelly and McClellan. You're talking about saving a major proportion of those jobs and yet your 20 year time line does not change one iota the savings the Commission projected before you came up with this plan.

A: Let me explain it to you.

First of all, as I mentioned before, much of the savings comes from infrastructure reduction. Not just from jobs. It comes from not having the need to maintain and keep all these facilities going. Secondly, the Air Force has a program in place now that reduces the number of jobs from the current base to the base we're talking about. So there already is a significant reduction in the number of jobs in these facilities from where we are. That has to be taken into consideration. So don't think about it as a steady state from today.

Rudy, do you want to say anything about the specific numbers?

Mr. de Leon: Just to elaborate, the excess capacity that exists is in infrastructure, it's not in people. We've taken 25,000 people out of the depots over the last five years already. So what we're really looking at is we have X amount of work, and it's apportioned off five facilities right now, and for the next five years we're going to run all five facilities. Then thereafter, we're going to be running three facilities as government entities and two facilities as private entities. I think one of the reasons we have confidence in this privatization initiative is the fact that we have been working on a BRAC '93 issue with respect to Newark, Ohio, which is a very sophisticated depot that handles electronics associated with ballistic missiles. After an elaborate effort on requests for proposals, and after some nay-sayers saying that we weren't going to get proposals, we're in a very competitive source selection right now at Newark, Ohio, so I think we have confidence that we can privatize work.

Q: Mr. Secretary, as intensely as you all have been studying this for two weeks, you don't have any idea what the cost would be to keep these jobs in California and Texas as opposed to moving some or all of them to...

Secretary White: I don't have specific illustrations. We have satisfied ourselves that we will meet our cost reduction goals. We have cost reduction goals based on these BRAC closings, we're going to meet those goals. We will get out the savings that are in the BRAC package.

Q: ...during their discussions and in their report said part of the reason for closing McClellan and Kelly was to better utilize the three remaining depots. If you keep all these two jobs in the two areas where the bases are going to be closed, what do you do about the excess capacity at these other three depots?

A: As Mr. de Leon just said, we've got to now adjust all five depots in a significantly different way than we had anticipated we would under the program that the Air Force and the Department put forward.

Q: What does that mean, adjust them?

A: It means we've got to make all kinds of adjustments in terms of the work force. As he just said, we're taking down the work force anyway. Now we have to look at the impact from the Commission's recommendations and what we're going to do in terms of these programs on the other depots. Is there more excess capacity? Yes. But we know that anyway.

Q: You're saying you're not going to reduce any of that excess capacity at the three remaining depots by shifting work from Kelly and McClellan.

A: That's correct.

Q: The depots will remain...

A: That is correct.

Q: What's the estimated cleanup cost at McClellan? Are you confident you'll be able to meet that by the end of the five year transition period, be able to use that site if you need to in the community for this work?

A: I do not. We may be able to give you one afterwards. I do not have an estimate. But we have looked carefully at ways to make sure we can do this program and still be consistent with the environmental laws in terms of cleanup, and we're satisfied that we can do that.

Q: You'll be able to turn that site over to the private sector after five years if they want to use it?

A: That's our belief at this time, yes.

Q: Did the Air Force ever consider any sort of privatization as a way to reduce depot costs even before they made their initial recommendations on this? And is this, maybe being forced into it, will this encourage more even at the other three?

A: I think, first of all, the Air Force had considered it. One of the things that really made a difference to us in terms of this proposal was the experience that the Air Force is literally going through now, which as Rudy pointed out, people thought they couldn't do in Newark. So that made a lot of sense to us.

Secondly, as we look at the past practice with respect to reduction, and as we look at the capability we have and the need we have to continue to reduce, we think privatization makes a lot of sense. The Commission thought it made a lot of sense. I ran the Roles and Missions Commission, and I can tell you, every time we looked at this, and we spent a lot of time on this issue, it makes a great deal of sense when you are coming down in terms of your acquisition reform programs, in terms of everything you're doing in the Department, you're trying to be better integrated into the economy, and one of the ways you ought to do that is privatization in terms of your supply, materiel, management, supply system, and your depot system.

Q: The BRAC process has a mechanism for the Commission to reconsider. If you had all these problems with the list and you still think the original list was better, why didn't you ask the BRAC Commission to take another look? Mr. Dixon said they were willing to.

A: We thought... First of all, we are very concerned about the integrity of the process. We wanted to make sure that that continued. Secondly, as we looked at the list, we found we could live with the changes they made as long as we had the flexibility to make the adjustments that we're talking about. We had that flexibility. So it seemed to us, as long as we can live with the list and we have the flexibility to do what we want to do, then in the spirit of BRAC, we ought to accept the list and the President ought to send it forward. That's what we recommended, and he agreed.

Q: So what specifically will require legislation?

A: We do not require legislation.

Q: None at all?

A: No, we do not require any legislation.

Q: If the private contractors have to pay for whatever space they use at McClellan, why won't that be reflected in the cost that you pay out, the Pentagon pays out? You won't own the base, but you're still going to have to pay a contractor, who will have to pay for space. I don't see how... Where do the savings come from? You have to pay for the space either directly or indirectly.

A: But you don't have to pay for all the surplus space. You only have to pay for the space for the workers whom you have in that particular location. Our problem is having too much structure, too much space. We don't have that space under this arrangement. That space is gone.

Q: The Air Force plan wasn't just a static straight thing, it was to do a lot of moving of stuff around and checking all five depots.

A: Right.

Q: This situation with this flexibility you've been talking about, is it possible you're going to end up doing essentially what the Air Force had planned to do initially, except that you've got two private...

A: No, we can't do what the Air Force suggested to do initially because...

Q: I mean in terms of where you locate the work, the size of the work force at various places.

A: We have to reevaluate, and we have reevaluated it. We have to close these facilities. We can't keep these facilities open.

Q: You're going to keep the work. I was asking about the work. The Air Force plan had to do with moving work around, keeping all five facilities open but shrinking those facilities. What I'm asking is, when you're done dealing with this privatization situation, might you end up something close to what the Air Force had initially intended in terms of what work is done where?

A: I doubt it. I think it's too early to say. It's a very complicated equation. I don't think we can say.

Q: The privatization that you've been referring to that the BRAC Commission has recommended has been, at least as I understand it, regular, strict privatization. Just turning over all the work to the private sector, and letting it be done wherever the private sector may want to do it.

A: That's not the case. In the case of Newark, Ohio, we're doing it in the site, in the facility.

Q: In this case also like that, you're going to say after five years, you're going to essentially force a company to hire workers in Sacramento even though they may be able to do it somewhere else.

A: We're not going to force a company to do anything. Our experience is that if we provide the opportunity for people we think, based on our conversations with private sector providers of these kinds of services, as with Newark, we don't think we're going to have a problem getting people interested in this proposition. We think quite the reverse. We think it will be very well received.

Q: If in fact the excess capacity at the other three depots will be greater under your compromise than had you not made the compromise or the plan for privatization, how do you answer the criticism that you're breaking the spirit if not the letter of the BRAC Commission?

A: Absolutely not breaking the spirit. If you go through the BRAC report, you will see time and time again discussions of privatization and discussions of privatization in place. We had conversations with the Commission about this. I had extensive conversations with the Chairman. The Chairman, in order to make sure that nobody misunderstood what we were doing, or raised a question about whether or not we were doing what was correct in terms of the spirit of the process, the Chairman wrote me a letter, was very explicit, unequivocal in terms of our ability to do just what we're intending to do in this case.